Scenario: The ultimatum game is a two-player game played as follows. One player, the proposer, is told to divide a sum of money between the two players. The proposer proposes how to divide the sum. The other player, the responder, then chooses to either accept or reject the proposal. If the responder accepts the proposal, the money is split according to the proposal. If the responder rejects the proposal, neither receives any money. When this game is played by real people from a common social group, it is frequently observed that the proposer offers close to 50-50 split and the responder rejects offers below 30 percent of the sum.
-Refer to the scenario above.According to the theory presented in the textbook,which of the following would happen in the Nash equilibrium?
A) The proposer offers 50 percent. The responder rejects it.
B) The proposer offers 100 percent. The responder accepts it.
C) The proposer offers 0 percent. The responder accepts it.
D) The proposer offers 25 percent. The responder rejects it.

Question

Quizplus · Accepted Answer

In the Nash equilibrium of the ultimatum game, the proposer offers the smallest possible amount (close to 0 percent), and the responder accepts it, because receiving something is better than nothing.

Scenario: the Ultimatum Game Is a Two-Player Game Played as Follows